By Lisa Baertlein
Web search leader Google Inc. is developing an online payment system
but not a direct rival to eBay Inc.'s PayPal, Google Chief Executive
Eric Schmidt said on Tuesday.
Schmidt spoke after several days of heated speculation over reports
that Google was working on a potential rival to PayPal, eBay's popular
online payment system.
Schmidt said Google does not intend to offer a "person-to-person
stored-value payments system" like PayPal's, in which money briefly
resides in PayPal's control during the transaction, but he did not
give details of how the Google system would differ.
"The payment services we are working on are a natural evolution of
Google's existing online products and advertising programs, which
today connect millions of consumers and advertisers," Schmidt told
Reuters in a brief telephone interview in which he declined to
"We believe that e-commerce can be improved and we are working on ways
to improve the user experience," Schmidt said.
The company declined to say when a product would be available.
By avoiding PayPal's model, Google may also bypass a replay of the
regulatory battles that were among the thorniest obstacles PayPal
faced in its early days as an independent company. The biggest issue
was PayPal's plan to briefly hold money on account, generally a bank
function, and the saga was chronicled in a book called "The PayPal
Google currently accepts payments from advertisers and sends money to
participants in its AdSense program, which pays Web publishers when
Google ads are displayed on their sites.
Google advertisers pay each time a Web surfer clicks on an ad that is
generated through the company's AdWords program.
In March, Google said it began testing a third-party electronic funds
transfer service to send payments to Web sites that carry Google ads.
The Web search darling recently launched a video search service, which
will sell content. The company also operates a price-comparison
shopping engine called Froogle, which analysts think could one day
become the heart of a full-fledged e-commerce system.
For its part, eBay has been working to expand PayPal's reach beyond
its online marketplace and has signed up a variety of retailers
including Apple Computer Inc.'s iTunes service that sells individual
songs for 99 cents each.
Analysts on Monday said the biggest and most immediate risk to PayPal
from a Google payment system would be a cap on growth in PayPal's
off-eBay business, prompting a 2 percent drop in eBay shares.
Google's stock on Tuesday closed up $1.14, or 0.4 percent, to $287.84.
Shares of eBay finished down 34 cents, or 0.9 percent, to $36.90 prior
to Schmidt's comments. Both stocks trade on the Nasdaq.
Copyright 2005 Reuters Limited.
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